Finance

ECB & Federal Reserve Boost Liquidity Injections, Aiding Bitcoin’s Value Proposition

Many say that these efforts could boost the value proposition of the cryptocurrency moving forward.
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It’s not a secret that global markets are in turmoil.

Just three weeks ago, investors were euphoric, with stocks continuing to hit new high after new high on the back of seemingly strong earnings and what seemed to be a booming economy. Now, stocks have dropped over 25% in the U.S., while economists are projecting a massive economic slowdown in the coming months due to the propagation of a novel coronavirus and a growing oil war.

Unsurprisingly, the world’s central banks have been forced to react, attempting to patch the holes appearing in the proverbial patchwork of the global economy. While Bitcoin has dropped amid this, many say that these efforts could boost the value proposition of the cryptocurrency moving forward.

ECB Announces More QE; Federal Reserve to Inject Over $1 Trillion

What crazy times we live in.

To responding to the flagging global economies, central banks are taking dramatic measures to try and keep things afloat.

The ECB this morning announced that it would be expanding its “asset purchase” program — better known as its Quantitative Easing program — by over 100 billion Euros, meaning it will purchase assets like bonds to help inject liquidity into the economy in an attempt to stabilize it.

This was followed up by the Federal Reserve, which just announced that it will be injecting a total of $1.5 trillion worth of short-term liquidity into the banking system to ensure that things remain intact. Funnily enough, stocks continued to fall after this announcement.

These two new efforts came shortly after the Bank of England made an emergency cut of its policy interest rate by 50 basis points to 0.25%, nearing negative rates for the first time ever.

Bitcoin Could Go to $20,000 Because of News Like This: BitMEX CEO

BitMEX CEO Arthur Hayes believes that these efforts could help boost Bitcoin in the coming months and years.

In the latest edition of his infamous newsletter, “Crypto Trader Digest,” he wrote that the attempts by central banks and governments will help Bitcoin “enjoy a nice run back through $10,000 towards $20,000 by year end.”

He Isn’t the Only One Who Thinks So

It isn’t only Hayes that thinks stimulating action by central banks and governments will boost Bitcoin.

Henny Sender of the Financial Times agreed with this sentiment. In a column for the Nikkei Asian Review, she wrote that the cutting of policy interest rates and the use of open market operations, “which amount to competitive currency devaluations in the name of reflating economies.” are driving up the price of Bitcoin.

Also, Peter C. Earle, a research fellow at the American Institute for Economic Research, told Bloomberg that once monetary policy reaches a point where printing any amount of money necessary without any checks, “precious metals and cryptocurrencies would swiftly rise in popularity and therefore [its] price.” 

This has been further echoed by Chamath Palihapitiya, the Facebook executive-turned-venture capitalist and an early Bitcoin investor. The Silicon Valley executive said in December 2017 and other occasions that he thinks the cryptocurrency will reach a price of $1 million in the coming years.

While this may sound crazy, the investor cited reasons to back up this lofty prediction:

This is a fantastic fundamental hedge and store of value against autocratic regimes and banking infrastructure that we know is corrosive to how the world needs to work properly. ou cannot have central banks infinitely printing currency.



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I am a writer who has been following the cryptocurrency space since 2013. My insights and interviews have been featured in leading publications in the industry such as LongHash, NewsBTC, and Decrypt. When I am not writing, I work as a team member of the EXODUS division of HTC, a Taiwanese electronics company. I own a small amount of Bitcoin. Contact NickC@blockonomi.com

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